The Practice of Theory

A commenter on a popular local blog about affordable housing pointed out that sometimes reality isn’t always convenient for theories, even sound ones. Policymakers have long touted the various benefits that can be gained from innovative policies. Inclusionary Zoning and public land agreements provide for a set-aside of affordable units in developments across the District. However, these arrangements are not always as beneficial as conjectured. For example, in the past decade, during the boom years of real estate, the District implemented partnerships with private developers that included a certain percentage of affordable for-sale units in luxury condominium developments. While this might have seemed to be a great way to integrate low and moderate income individuals and families, the reality has been less than spectacular. ADU buyers at these developments have experienced escalating condo fees -many of them at 100% more than what they were initially paying at the time of purchase.

Further compounding this problem is the resale process. Because of the restrictive covenants, ADU owners must abide by a resale formula. The formula limits appreciation and requires the ADU owner to resell these units to a buyer within the same income category and at a price that is affordable to this purchaser. The problem with this is that because of the escalating condo fees, the formula will not allow any appreciation to the original ADU owner. So, this ADU owner, who purchased a home and assumed all of the typical risks of homeownership, gets none of the reward. The end result is that this ADU owner is now in worse financial shape upon resale than before they purchased a unit, and from factors that have nothing to do with the market. How does this move people up the socio-economic ladder? How does this solve the District’s problem of the ever-widening wealth disparity?

A post today in the City Paper’s Housing Complex contemplates why the only two condo units produced through the District’s Inclusionary Zoning policy have not yet sold. Blame is attributed to difficult lending guidelines, another unforeseen issue that further pokes holes in sound theories Blogger W Jordan ends a comment by stating “in theory [the author] is not wrong, but we don’t live in theoretical neighborhoods”. A very apt observation and something that City officials and policymakers should take notice of.